Here’s a basic summary of what the HST means:
- On July 1st the Provincial Sales Tax (PST) and the federal GST or Goods and Service Tax will both be replaced by a single unified tax called the HST or Harmonized Sales Tax.
- The unified tax is administered federally. In British Columbia, the rate is 12%. Of that, 7% is allocated to the provincial government, while 5% goes the federal government. For Ontario, the overall rate is 13%; 8% provincial, 5% federal.
- While the HST is new for Ontario and British Columbia, it follows similar “tax blending” initiatives already in place in Nova Scotia, New Brunswick, Newfoundland and Labrador, and in over 130 countries around the world.
There are foreseeable benefits for small businesses.
- Input Tax Credits (ITCs) will reimburse many of your business purchases that were PST-exempt but now attract HST.
- Savings on your input costs could make your business more competitive.
- Time and expense saved by no longer managing and remitting a separate provincial tax will also be a
win.
Know where you stand
- Businesses now selling PST exempt goods and services will have to adjust to a higher tax.
- Some examples are Professional and personal services like accounting and hair-cutting; restaurants
and intensive labour such as cleaning and maintenance services are also included.
- Be aware of several key implementation rules.
- For example, as of May 1st 2010, the HST is applicable to taxable goods and services that will be delivered after the July 1st turnover. Your tax management systems will need to reflect this transitional phase.
Inform yourself. A visit to these websites will help you learn more about how the HST affects your business:
- CFIB: http://www.cfib-fcei.ca
- BC Government: http://www.gov.bc.ca/hst/
- Ontario Ministry of Revenue: http://www.rev.gov.on.ca/en/taxchange/index.html
- Canada Revenue Agency: http://www.cra-arc.gc.ca/harmonization/
Get on board with these necessary steps:
- Figure out the impact of the HST on your budget. Imagine how cash flow projections might change and plan your corporate spending accordingly.
- Plan to update sales equipment such as cash registers so they will charge the correct amount of tax.
- The same can be done for website interfaces and online payment software so as to collect HST on internet sales.
- Updating price lists and catalogues to reflect the HST is an essential move. Your client base will appreciate this if done in advance.
- Another proactive strategy is to talk to your customers and suppliers before the changes are implemented. Show how informed you are about how the tax will affect them.
- Update your purchasing and accounting software. This includes accounts payable, tax credit and taxable benefits calculations, invoicing, as well as spreadsheets that manage expense accounts.
- Up-to-date tax management software will eliminate errors and avoid potential confusion. All Intuit’s 2010 QuickBooks products are HST-ready, easing your business’s transition to the new tax system.
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